Accounting firms finding Sarbanes creating stress

SCOTT WRAG, a CPA at Tofias PC, says he jumped ship from larger firm Ernst & Young in part because of the extra stress created by the Sarbanes-Oxley Act. /
SCOTT WRAG, a CPA at Tofias PC, says he jumped ship from larger firm Ernst & Young in part because of the extra stress created by the Sarbanes-Oxley Act. /

CPA Scott Wragg recognized that there was a problem soon after the Sarbanes-Oxley Act took effect in 2002.

For 20 years at the national accounting firm Ernst & Young, the tax specialist had worked closely with clients, providing guidance during audits. But Sarbanes-Oxley, a response to a spate of high-profile corporate and accounting scandals, changed that.

The rules no longer allowed auditors to also act as consultants for their clients. “It made it a more adversarial situation,” he said. “After Sarbanes, it just didn’t feel right.”

So in 2005 Wragg jumped ship and joined Tofias PC, a smaller firm that doesn’t audit public companies. He has never regretted the move, he said last week.

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Officials at some regional firms say Wragg’s story is a common one and becoming more frequent.

Tracy Gallagher, managing partner at Cambridge-based Tofias, which has offices in Providence, said his firm has added about a dozen high-level CPAs from national firms in the last two years.

“These are people who want to be challenged,” Gallagher said, “without the stresses and strains of Sarbanes.”

Sarbanes-Oxley mandates tighter financial controls for public companies and attempts to create greater auditor independence, among other things. It created an opportunity for many mid-level firms such as Tofias. As the workload increased for the Big Four firms, some companies were forced to look for accountants at smaller firms.

Also, because the Big Four firms no longer could serve as both auditor and consultant to their clients, much of the consulting work was pushed down to the smaller accountants.

Frank Scuito, a partner at DiSanto Priest & Co. in Warwick, agreed that Sarbanes-Oxley has changed the industry and created “incredible pressure” at the Big Four. As a result, he has recruited professionals who were looking for work that was not all-consuming. “The guys we’re bringing on board are more looking for a good work-family balance.”

Scuito, who moved from KPMG 22 years ago, said he has also noticed a few other trends: He said the Big Four have stepped up recruiting on college campuses, and seasoned accountants are now more apt to take an in-house position with a company.

“The Big Four are snapping up the graduates,” Scuito said. “And once they do get burned out, they’re going from the Big Four into private. I don’t like that trend.”

Jack Trifts, dean of the College of Business at Bryant University, said CPAs always have migrated from national firms to smaller ones, and he said he isn’t so sure that Sarbanes-Oxley has quickened the pace.

Unrelated to Sarbanes-Oxley, he said he has heard of professionals making the switch because of the lack of an impact they’re making at the national firms. Whereas at the Big Four firms, the managing partner might not know who you are, at a smaller firm, “you’re probably going to meet the managing partner every morning at the coffee pot,” Trifts said.

Wragg, who works with about 40 professionals in the Providence office, said the difficulty of getting noticed at Ernst & Young played a part in his decision to make a change. “In a big firm like that it’s pretty difficult to get your thoughts aired,” he said.

But the work he was performing was the main reason for his departure from Ernst & Young, as Sarbanes-Oxley limited his ability to provide guidance to his clients, and the relationships turned almost contentious. “The job satisfaction at the Big Four changed, and people started re-evaluating their careers.”

At Tofias, Wragg has returned to consulting for public and private companies. “Now I have the ability to become a true client advocate again and sit on the same side of the table as my client,” Wragg said. •

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